Category: Public Choice

Government Wastes Millions on Corrupt Nanotech Boondoggle

(p. A19) In Utica, a former industrial hub in upstate New York where the near collapse of manufacturing has made for a scarcity of jobs and a rarity of good news, the announcement in August 2015 that an Austrian chip maker had decided to put down roots in a fabrication plant built by the state was cause for jubilation.
Gov. Andrew M. Cuomo celebrated with an appearance in Utica, promising $585 million in state funds to cement the public-private partnership, which was to create 1,000 jobs. Some in the crowd wept with emotion.
But last week, after months of delays and mismanagement that culminated in September with federal prosecutors revealing a far-reaching bribery and bid-rigging scheme, state and local officials said that the Austrian chip maker, AMS, had abandoned the project.
The Utica project was merely one chunk of the multibillion-dollar investment with which the Cuomo administration has pledged to seed nanotechnology and high-tech industries in upstate cities starved for economic growth.
. . .
For the state, it seems, the strategy developed by Mr. Kaloyeros and trumpeted by Mr. Cuomo — to lavish hundreds of millions of dollars in state subsidies on corporate partners to create high-tech jobs — is unblemished. Yet the model has come in for repeated criticism from government watchdogs, who say an economic policy that tries to create risky new industries virtually from scratch, and that spends millions in taxpayer dollars to create every new job, is folly.
“We’re incredibly skeptical of the economic logic behind these projects because they’re too expensive,” said John Kaehny, the executive director of Reinvent Albany, a good-government group. “There is no economic logic to (p. A21) this, really. But there’s a huge political logic to it. The governor desperately needs for this to be a success for his political legacy in New York.”

For the full story, see:
VIVIAN YEE. “How Missteps Doomed Plan for Growth, Foiling Cuomo.” The New York Times (Weds., DEC. 28, 2016): A19.
(Note: ellipsis added.)
(Note: the online version of the story has the date DEC. 27, 2016, and has the title “How Cuomo’s Signature Economic Growth Project Fell Apart in Utica.”)

Tech Firms Rally Their Customers to Fight Restrictive Regulations

(p. A23) The nasty battle between Uber and the administration of Mayor Bill de Blasio over New York City’s proposed cap on livery vehicles has ended, at least for now, with the city and the ride-hailing giant agreeing to postpone a decision pending a “traffic study.” There’s no doubt who won, though. The mayor underestimated his opponent and was forced to retreat.
It wasn’t just conventional pressure — ads, money, lobbying — that caught the mayor off guard. Uber mobilized its customers, leveraging the power of its app to prompt a populist social-media assault, all in support of a $50 billion corporation. The company added a “de Blasio’s Uber” feature so that every time New Yorkers logged on to order a car, they were reminded of the mayor’s threat (“NO CARS — SEE WHY”) and were sent directly to a petition opposing the new rules. Users were also offered free Uber rides to a June 30 rally at City Hall. Eventually, the mayor and the City Council received 17,000 emails in opposition. Just as Uber has offloaded most costs of operating a taxi onto its drivers, the company uses its customers to do much of its political heavy lifting.
Uber’s earlier strategy to win entry into the Portland, Ore., market followed a similar pattern. When the city wasn’t allowing the company to operate taxis, Uber exploited rules that allowed it to act as a delivery company, and distributed free ice cream around town. Using data on these deliveries, the firm shrewdly recruited recipients as pro-Uber citizen lobbyists, pressuring local officials to allow their cars to pick up passengers. It worked.
Many tech firms now recognize the organizing power of their user networks, and are weaponizing their apps to achieve political ends. Lyft embedded tools on its site to mobilize users in support of less restrictive regulations. Airbnb provided funding for the “Fair to Share” campaign in the Bay Area, which lobbies to allow short-term housing rentals, and is currently hiring “community organizers” to amplify the voices of home-sharing supporters. Amazon’s “Readers United” was an effort to gain customer backing during its acrimonious dispute with the publisher Hachette. Emails from eBay prodded users to fight online sales-tax legislation.

For the full commentary, see:
EDWARD T. WALKER. “The Uber-ization of Activism.” The New York Times (Fri., AUG. 7, 2015): A23.
(Note: the online version of the commentary has the date AUG. 6, 2015.)

Government Sugar Protectionism Kills More Jobs than It Saves

(p. A13) As if domestic price-fixing by the government–here, driving prices up by setting production limits–weren’t enough, the feds then set a limit on sugar imports, and punish any imports above that limit with heavy tariffs.
The result? Countries such as Canada openly advertise to U.S. companies that use sugar–for instance, in the food industry–that they will enjoy lower business costs if they move. And when companies leave, like some candy makers that have moved production overseas, they take their jobs with them. Even the Commerce Department admits that for every job that the sugar program “protects,” it kills three others.
Reforming this policy sounds like a no-brainer, but the small number of beneficiaries use their benefits to influence–by lobbying, for instance, or with campaign contributions–politicians who block any reforms. No wonder sugar was the only commodity program not to be reformed by having its subsidies reduced in the most-recent farm bill, in 2013.

For the full commentary, see:
JOE PITTS and DAVID MCINTOSH. “Your Funny Valentine Candy Pricing; Making a box of chocolates more expensive is one of many ways federal sugar policy hurts U.S. taxpayers.” The Wall Street Journal (Fri., Feb. 12, 2016): A13.
(Note: the online version of the commentary has the date Feb. 11, 2016.)

Better Policies Can Turn Stagnation into Growth

(p. A19) . . . , now ought to be the time that policy makers in Washington come together to tackle America’s greatest economic problem: sclerotic growth. The recession ended more than seven years ago. Unemployment has returned to normal levels. Yet gross domestic product is rising at half its postwar average rate. Achieving better growth is possible, but it will require deep structural reforms.
The policy worthies have said for eight years: stimulus today, structural reform tomorrow. Now it’s tomorrow, but novel excuses for stimulus keep coming. “Secular stagnation” or “hysteresis” account for slow growth. Prosperity demands more borrowing and spending–even on bridges to nowhere–or deliberate inflation or negative interest rates. Others advocate surrender. More growth is impossible. Accept and manage mediocrity.
But for those willing to recognize the simple lessons of history, slow growth is not hard to diagnose or to cure. The U.S. economy suffers from complex, arbitrary and politicized regulation. The ridiculous tax system and badly structured social programs discourage work and investment. Even internet giants are now running to Washington for regulatory favors.
. . .
So why is there so little talk of serious growth-oriented policy? Regulated and protected industries and unions, and the politicians who extract support from them in return for favors, will lose enormously. The global policy elite, steeped in Keynesian demand management for the economy as a whole, and microregulation of individual businesses, are intellectually unprepared for the hard project of “structural reform”–fixing the entire economy by cleaning up the thousands of little messes. Even economists fight to protect outdated skills.

For the full commentary, see:
JOHN H. COCHRANE. “Don’t Believe the Economic Pessimists; Memo to Clinton and Trump: The U.S. economy can and will grow faster with the right policies.” The Wall Street Journal (Mon., Nov. 7, 2016): A19.
(Note: ellipses added.)

$19 Billion in Farm Subsidies Mostly Go to Big Farms

(p. A17) President-elect Donald Trump’s vow to “drain the swamp” in Washington could begin with the Agriculture Department. Federal aid to farmers is forecast by the Congressional Budget Office to soar to $19 billion in 2017. Farmers will receive twice as much of their income from handouts (25%) this year as they did in 2013, according to the USDA. Whoever Mr. Trump names as his agriculture secretary should target wasteful farm programs for spending cuts.
. . .
While generous government subsidies are defended by invoking the “family farmer,” big farmers snare the vast majority of federal handouts. According to a report released this year by the Environmental Working Group, a Washington-based nonprofit research organization, “the top 1 percent of farm subsidy recipients received 26 percent of subsidy payments between 1995 and 2014.” The group’s analysis of government farm-subsidy data also found that the “top 20 percent of subsidy recipients received 91 percent of all subsidy payments.” Fifty members of the Forbes 400 list of wealthiest Americans have received farm subsidies, according to the group, including David Rockefeller Sr. and Charles Schwab.

For the full commentary, see:
JAMES BOVARD. “Living Off the Fat of Washington; If Trump is going to ‘drain the swamp,’ he might start with wasteful ag subsidies.” The Wall Street Journal (Mon., Dec. 12, 2016): A17.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Dec. 11, 2016.)

Infrastructure Costs Often Exceed Benefits

(p. A13) Most federal infrastructure spending is done by sending funds to state and local governments. For highway programs, the ratio is usually 80% federal, 20% state and local. But that means every local district has an incentive to press the federal authorities to fund projects with poor national returns. We all remember Alaska’s infamous “bridge to nowhere.”
In other words, if a local government is putting up only 20% of the funds, it needs the benefits to its own citizens to be only 21% of the total national cost. Yet every state and every locality has potential infrastructure needs that it would like the rest of the country to pay for. That leads to the misallocation of federal funds and infrastructure projects that benefit the few at the cost of the many.
. . .
Japan tried infrastructure-heavy serial fiscal stimuli for decades and is trying again under Prime Minister Shinzo Abe. Yes, Japan now has many new bridges, roads and paved drainage ditches, but the spending has done little to improve Japan’s meager growth rate.

For the full story, see:
MICHAEL J. BOSKIN. “All Aboard the Infrastructure Boondoggle; Whoever wins on Nov. 8, a flood of public-works money is coming. Cost-benefit tests are crucial.” The Wall Street Journal (Tues., Nov. 1, 2016): A13.
(Note: ellipsis added.)
(Note: the online version of the article has the date Oct. 31, 2016.)

Tesla Fights Car Dealership Monopoly

(p. B4) Tesla Motors Inc. filed an application for a dealership license in Michigan, setting up a potential legal fight over the state’s ban on selling cars directly to consumers.
. . .
About a year ago, Michigan passed a law prohibiting car makers from selling directly to customers in the state without an independent dealer as an intermediary. Tesla has opposed such dealer-franchise laws, calling them anticompetitive. Tesla allows customers to order vehicles directly from the company, something that other manufacturers are prohibited from doing.
A formal denial of its application by Michigan could prompt Tesla to pursue additional legal avenues to fight a law it calls “very harmful.”
“Tesla is committed to being able to serve its customers in Michigan, and is working with the legislature to accomplish that. The existing law in Michigan is very harmful to consumers,” a Tesla spokeswoman said. “Tesla will take all appropriate steps to fix this broken situation.”
. . .
Michigan and Texas are among a small group of states that have a flat prohibition on any direct sales. The laws were created to prevent car makers from building their own stores that would ​then ​compete with independent​dealerships. Michigan Automotive Dealers Association couldn’t immediately be reached for comment.
Such competition could potentially undercut independent dealerships’ prices and undermine investments made in their stores, according to lawyers and economists who have scrutinized dealer-franchise laws.

For the full story, see:
Ramsey, Mike. “Tesla Seeks License to Sell Cars in Michigan.” The Wall Street Journal (Tues., Feb. 2, 2016): B4.
(Note: ellipses added.)
(Note: the online version of the article has the date Feb. 1, 2016, and has the title “Tesla Motors Files for a Dealership License in Michigan.” The online version is slightly different from the print version. The passage quoted above is from the online version.)

Unions Spend $108 Million on 2016 Elections

UnionPresidentialElectionSpendingGraph2016-11-14.jpgSource of graph: online version of the WSJ article quoted and cited below.

(p. A1) PHILADELPHIA–U.S. labor unions are plowing money into the 2016 elections at an unprecedented rate, largely in an effort to help elect Hillary Clinton and give Democrats a majority in the Senate.

According to the most recent campaign-finance filings, unions spent about $108 million on the elections from January 2015 through the end of August [2016], a 38% jump from $78 million during the same period leading up to the 2012 election, and nearly double their 2008 total in the same period. Nearly 85% of their spending this year has supported Democrats.

For the full story, see:
BRODY MULLINS, REBECCA BALLHAUS and MICHELLE HACKMAN. “Labor Unions Step Up Presidential-Election Spending.” The Wall Street Journal (Weds., Oct. 19, 2016): A1 & A4.
(Note: ellipsis, and bracketed year, added.)
(Note: the online version of the story has the date Oct. 18, 2016, and has the title “Unions Up the Election Ante.”)

FCC Regulations Motivated by Cronyism, Not Economics

(p. A13) . . . , this burgeoning competition between fixed and mobile has always been predictable and yet has figured not at all in the Federal Communications Commission’s regulatory efforts, which paint the country as descending into an uncompetitive broadband hell.
A new study by economists Gerald Faulhaber and Hal Singer details how an agency that once prized economic analysis increasingly ignores or disregards economics in its regulatory findings. Why? Because if it acknowledged the increasing competitiveness of the market, there would be nothing to regulate, no favor-factory opportunities for its political sponsors to milk.

For the full commentary, see:
HOLMAN W. JENKINS, JR. “BUSINESS WORLD; Big Cable and Mobile Are Ready to Rumble; Technology is about to upend Washington’s dire prescriptions for a broadband monopoly.” The Wall Street Journal (Sat., Oct. 8, 2016): A13.
(Note: ellipsis added.)

The working paper mentioned above, is:
Faulhaber, Gerald, and Hal Singer. “The Curious Absence of Economic Analysis at the Federal Communications Commission: An Agency in Search of a Mission.” 2016.

Medal-Winning Official Steals Concrete from Public Road and Sells to Cronies

(p. A4) MOSCOW — Corruption in Russia sometimes amounts to highway robbery, literally.
A senior prison official has been accused of stealing the pavement from a 30-mile stretch of public highway in the Komi Republic, a thinly populated, heavily forested region in northern Russia, the daily newspaper Kommersant reported on its website on Wednesday [January 13, 2016].
. . .
While he was in Komi, Mr. Protopopov won a medal for fostering “spiritual unity,” the Kommersant report said, without specifying whether the unity was with the crews doing the illicit road work.

For the full story, see:
NEIL MacFARQUHAR. “Don’t Blame Snow for Missing Road in Russia’s North.” The New York Times (Thurs., JAN. 14, 2016): A4.
(Note: ellipsis, and bracketed date, added.)
(Note: online version of the story has the date JAN. 13, 2016, and has the title “Missing a Road in Russia? This May Be Why.”)

Feds Use Taxpayer Money to Buy $20 Million of Cheese

(p. C1) U.S. agricultural officials agreed to purchase $20 million of cheese products from struggling dairy farmers who pleaded for a bailout earlier this month.
Around 11 million pounds of food will be donated to families throughout the country through government nutrition-assistance programs, the U.S. Department of Agriculture said.
. . .
The national Milk Producers Federation, a group of roughly 30,000 farmers, on Aug. 12 asked the agency to purchase a much as $150 million of cheese, as a glut of dairy products and other food commodities has sent prices for many farmers to the lowest levels in years.

For the full story, see:
Gee, Kelsy. “U.S. Says Cheese–to Aid Farmers.” The Wall Street Journal (Thurs., Aug. 25, 2016): C1.
(Note: ellipsis added.)
(Note: after much searching on 9/10/16, I could not find an online version of the story on the WSJ site.)